Microsoft to Invest $1.7 Billion in Indonesia for AI, Cloud

(Bloomberg) -- Microsoft Corp. will invest $1.7 billion to build out cloud computing and artificial intelligence infrastructure in Indonesia, betting on Southeast Asia’s biggest economy to spur growth.

Chief Executive Officer Satya Nadella announced the outlay, to be made over four years, after meeting with President Joko Widodo in Jakarta on Tuesday. The company also pledged to help train 2.5 million people in Southeast Asia with AI skills, including 840,000 in Indonesia.

Microsoft’s leader is on a three-country tour of Southeast Asia. The region, once neglected by corporate chieftains who focused on giant economies such as China and India, has become more popular of late as CEOs jockey for position during a time of rising geopolitical tensions. It’s one of the biggest battlegrounds for technology giants and startups from China and the US. Before Nadella, Nvidia Corp.’s Jensen Huang and Apple Inc.’s Tim Cook also paid high-profile visits to the region, chasing a young and tech-savvy population as Chinese growth wanes.

“The intelligence revolution is going to be the next major bend in the curve of GDP growth,” Nadella told hundreds of attendees at a company event in Jakarta, including software developers, ministers and CEOs. “This is going to have a real impact even in Indonesia where we will have in the region 10%-12% extra growth.”

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AI has become the primary agenda for Nadella as he traverses countries and conferences from India to the World Economic Forum, exhorting nations and businesses to invest in the tech and train their populations, while talking up the potential of AI to re-make entire economies. He is slated to visit Bangkok and Kuala Lumpur later this week.

Microsoft and rivals such as Alphabet Inc.’s Google and Meta Platforms Inc. are locked in a battle for AI dominance. The Redmond, Washington-based firm, the world’s most valuable company, has joined forces with OpenAI to challenge Google’s two-decade lead in internet search.

The company is betting on generative AI technologies to retake the lead, and regards Asia as both a major market and talent pool. In 2021, it unveiled an initiative to boost inclusive economic growth in Indonesia, including setting up the company’s first data center in the country.

Indonesia is prepared to offer incentives for Microsoft for its investments, Coordinating Maritime and Investment Affairs Minister Luhut Panjaitan said at the event. “What incentive you get in India, in Thailand — anywhere — we can give you better,” he said.

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The country has offered the island of Bali and the nation’s new capital Nusantara as potential locations for Microsoft’s research and data center, Information and Communications Minister Budi Arie Setiadi told reporters. The government also announced plans to offer dual citizenship to its skilled diaspora as part of efforts to stem a brain drain of local talent.

Microsoft leveraged a $13 billion investment in OpenAI to create a series of AI assistants and other features that it weaved into products ranging from Windows and Office to search engine Bing, many of which carry additional fees for customers to use. The company is spending heavily to expand its global network of data centers to meet rising demand for AI services — with capital expenses reaching $14 billion during the March quarter.

Nadella, who took the helm at Microsoft 10 years ago, has been vocal about the technology’s potential in Southeast Asia. The region is fast emerging as a competitive battleground and manufacturing base for US companies seeking alternatives to China, which is struggling with a growing thicket of US tech export restrictions.

During a visit to India in February, Nadella urged countries to aggressively invest in the technology and pledged to train 2 million people in his birth country with AI skills. Microsoft opened its first data center in Malaysia about three years ago.